What is Coinbase Vault, and is it secure?6 min read

Knowing how secure Coinbase Vault is is is essential before deciding how to store and manage your cryptocurrencies. Keeping a huge sum of crypto in a hot wallet online presents several security issues. You could lose all your crypto coins if there is a hack on your online wallet. And it can be extremely difficult, if not impossible, to recover.

Some cryptocurrency exchanges, such as Coinbase, offer cryptocurrency deposits as an additional layer of security for major cryptocurrency holdings.

So the question arises: what is Coinbase Vault? Is Coinbase Vault safe? There are many types of cryptocurrency vaults out there, so let’s look at Coinbase Vault.

What exactly is a Crypto Vault?

Coinbase Vault
Voyager Digital Ltd. Logo (CNW Group/Voyager Digital (Canada) Ltd.)

A cryptocurrency vault is a custodial service provided by an exchange or other trusted source that lets you keep your cryptocurrency and digital currency offline and is a step ahead of a cryptocurrency wallet. Knowing where to put your money as you learn to invest is an important aspect of preserving your assets.

When you have your hardware wallet, also known as a cold wallet, you can store your crypto coins in a way that is not connected to the internet. 

If you want to keep multiple cryptocurrencies offline but don’t want to create your cold storage wallet, you can do so using the services of a cryptocurrency vault. A cryptocurrency vault custodian takes most of your tokens from an internet-connected hot wallet and keeps them offline.

Multiple owners can also use Vaults, allowing you to share ownership of the tokens they contain and needing permission from all owners before removing tokens from the vault. Vault withdrawals are more secure than wallet withdrawals, providing an extra degree of security. It also makes them less handy than a crypto wallet, and you might want to have both.

If you own a Coinbase account, you can access the vault that Coinbase creates for its users. Coinbase Vault works with all the cryptocurrencies on the exchange, including Bitcoin (BTC) and other coins such as Ethereum (ETH), Dogecoin (DOGE), Litecoin (LTC), and others. For more details, see our Coinbase review.

Other cryptocurrency exchanges offer similar services. Gemini, for example, offers its Custody product, which is essentially a cryptocurrency vault. You can learn more about Gemini by reading our Gemini review.

How does Coinbase Vault work?

The main purpose of a cryptocurrency vault is to store large amounts of cryptocurrency over a long period. You must decide where to store your tokens as you learn how to buy bitcoins and other altcoins.

To facilitate trades and transactions, you may want to keep a small amount of tokens on the exchange or in a hot wallet, but if you want to keep them long-term, it is better to keep them in a unit, like a vault. A vault is similar to a bank account where you can transfer and spend your money, as well as an account where you can access your money with a simple password.

The vast majority of your secure assets are physically stored in vaults and deposit boxes around the world with Coinbase. It is also possible to add additional security features to Coinbase Vault to allow a withdrawal and mandatory waiting periods.

Multiple owners/users can be invited to a Coinbase Vault account. This way, protocols can be established to prohibit a single person from withdrawing tokens without the consent of other designated approvers if they jointly own crypto assets.

Any Coinbase user can set up Coinbase vaults for free, just like you can set up a free cryptocurrency wallet on Coinbase. Your account wallet has a listing for the vault. You can share your vault address with others. You can quickly exchange assets between your Coinbase wallet and your vault.

Procedure to withdrawing your money

There are several processes when it comes to withdrawing money from the vault:

1. Go to your wallet on Coinbase.com and choose the vault option.

2. Choose to exit.

3. Decide how much cryptocurrency you want to withdraw from the vault.

4. Your email address will be used to send an approval email.

5. Coinbase will send approval notifications to the vault co-owners email addresses.

6. You or your co-owners must approve the request.

7. It will take 48 hours for the authorization to take effect.

8. You will see the cryptocurrency in your Coinbase account when it comes out of the vault and given some time to sit there.

You should also be aware that you can only have one pending withdrawal request using Coinbase Vault at a time.

Is Coinbase Vault safe?

Is Coinbase safe? The security of your vault is a question that needs to be answered. The trust you have in Coinbase is an important factor to consider. As long as your vault is offline, you can be sure that your coins and tokens are safer than they would be if stored in a hot wallet or exchange.

Money from your Coinbase account can quickly evaporate if your username and password are used in an account takeover. A safer option would be to keep most cryptocurrencies on Coinbase. Even if the vault is hacked, an attempt to withdraw funds will be subject to a timeout and notification to the email address associated with the vault. You would obviously reject the withdrawal, and the order would expire.

Cold storage wallets and paper wallets are used to manage your storage space if desired (a piece of paper with private and public keys printed on it). Both solutions are less vulnerable to hacking or account buying because they are not connected to the internet. If someone can get your private keys, they can access your digital assets, but that’s much more difficult with cold storage and paper wallets.

Is Coinbase Vault a good idea?

Anyone who owns a lot of crypto assets but doesn’t want to face the hassle of managing their cold wallet or paper wallet can take advantage of Coinbase Vault. Vault is a reliable long-term solution for storing considerable amounts of digital content. At the same time, keeping a smaller amount of your coins in your exchange account or your hot wallet for frequent transfers or transactions is also possible.

Coinbase Vault is not viable for anyone who wants to use it regularly or trade cryptocurrency because withdrawal takes several days. Vaults may be a better option if you only need limited access to your funds, such as when exchanging them for fiat currency.

Advantages and Disadvantages

Pros

  • Co-owner consent is required before an asset can be withdrawn, preventing a single person from taking control of the entire portfolio.
  • Manage your digital assets without maintaining a separate cold room or paper wallet.
  • Storing digital assets in a cold storage unit instead of a hot wallet or exchange increases security.

Cons

  • It is difficult to get valuables from the vault
  • There are restrictions on crypto that Coinbase offers.
  • Unlike a paper wallet or cold wallet, you have less control.

Bottom Line

Using Coinbase Vault to store your crypto assets offline can be a convenient option. Most of your cryptocurrencies may be safe, but you can still use a small portion of them for transactions or day-to-day transactions.

As long as you feel comfortable with your Coinbase Wallet and Coinbase Vault, Coinbase can be a great option for trading.